Growing inequality and environmental degradation are two serious problems that developing economies will have to face in their economic growth processes. These two problems are closely interrelated. For example, the importation of labour‐saving industrial technologies from high‐income countries tends to increase returns to capital relative to labour. Such technologies are adopted often without accompanying adequate investment in pollution control, resulting in horrible environmental pollution. Institutional innovations are needed to prevent income inequality and environmental degradation from rising, while sustaining the growth of developing economies.
Keywords: Coase theorem; developing countries; economic growth; environmental degradation; Inverted‐U curve; Kyoto protocol; Pigou theorem; pollution
Chapter. 15221 words. Illustrated.
Subjects: Economic Development and Growth
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